No. 84CA0596Colorado Court of Appeals.
Decided November 5, 1987. Rehearing Denied December 17, 1987. Certiorari Denied May 16, 1988 (88SC21).
Appeal from the District Court of Jefferson County Honorable James D. Zimmerman, Judge
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Raphael M. Solot, for Plaintiffs-Appellants and Cross-Appellees.
Phelps, Hall, Singer Dunn, Alan Gary Dunn; Richard P. Hall, for Defendants-Appellees and Cross-Appellants, Mariposa Associates, Iowa Gulch, Ltd., and Robert C. Murphy.
Bradley, Campbell Carney, Victor F. Boog, Jim M. Hansen, for Defendant-Appellees and Cross-Appellants, Mountain Land Construction Co., a corporation, Buffalo Park Development Co., and Ronald Lewis.
Division III.
Opinion by JUDGE CRISWELL.
[1] After a bench trial in the district court, plaintiffs recovered a money judgment against all defendants, based upon plaintiffs’ claims that all defendants were participants in a joint venture that was guilty of breach of contract and fraudulent concealment. Defendants appeal from the judgment, asserting that the evidence fails to support the court’s liability conclusions and that the court erred in granting to plaintiffs pre-judgment interest on the damage award. Plaintiffs also appeal, complaining of the method used by the trial court to compute their monetary damages, of its denial of punitive damages, and of the court’s equitable decree requiring plaintiffs to convey certain land to one of the defendants. We affirm in part and reverse in part. [2] Defendant Mariposa Associates (Mariposa) is a limited partnership of which defendant Iowa Gulch, Ltd., is a general partner. Defendant Robert C. Murphy is one of Mariposa’s limited partners. Defendants Mountain Land Construction Co. (Mountain Land) and Buffalo Park Development Co. (Buffalo Park) are corporations of which defendant Ronald Lewis (Lewis) was the sole or principal stockholder and chief executive officer. [3] In August 1969, Mariposa purchased land consisting of approximately 900 acres, located in Jefferson County. In connection with that purchase, it executed a purchase money deed of trust, securing a promissory note in a substantial amount.Page 404
[4] In September 1969, Mariposa entered into an agreement with Buffalo Park (the Master Development Contract) that required Buffalo Park to develop a portion of the land into residential building sites by platting and zoning the same, by installing roads and public utilities, and by selling the building sites thus developed. It was to be Mariposa’s sole responsibility to make all payments required by the purchase money note and to pay all ad valorem taxes; all expenses relating to the development and sale of the property were to be the sole responsibility of Buffalo Park. Upon the sale of any residential building site, the “gross purchase price” was to be divided equally between Mariposa and Buffalo Park (without regard to the relative level of expenses each would have individually incurred). The Master Development Contract provided that it should not be construed as creating any partnership or agency relationship between the parties, or otherwise subjecting Mariposa to any debts or liabilities which Buffalo Park might incur in connection with the project. [5] Buffalo Park agreed to develop and sell 80 acres of residential sites per year, commencing October 1, 1969. In the event that it defaulted in this obligation, Mariposa was entitled to terminate the Master Development Contract. As of the end of the first year, Buffalo Park had not developed and sold the 80 acres required. Rather than terminating the agreement, however, the parties entered into an amendment to the Master Development Contract in October 1970 that had the effect of excusing Buffalo Park’s failure to develop that year in return for an increased consideration to Mariposa. [6] At some point in 1971, Lewis proposed to Mariposa, and it agreed, that the Master Development Contract be modified again, so as to allow the sale of undeveloped tracts to investors who would, in turn, enter into additional development contracts with one of the companies owned by Lewis. The trial court found, with record support, that this proposal was made by Lewis so as to provide to him and his companies additional cash with which to perform the obligations under the Master Development Contract. A short memorandum was executed authorizing the sale of a portion of Mariposa’s land to other investors and providing that the gross proceeds from the sale of this undeveloped land were to be divided equally between Mariposa and Buffalo Park. By the terms of this memorandum, after the sale of this land to third parties, Mariposa “would not be a party to or financially involved in the redevelopment (sic) phase of the property [thus sold].” [7] Plaintiffs thereafter purchased small parcels of the land from Mariposa by means of individual installment land contracts (ILCs) and then entered into individual development agreements (IDAs) with Mountain Land (or, in one case, with Buffalo Park). Each ILC generally involved a 5- or 10-acre parcel and provided for the purchase price to be paid in installments over a period of up to 15 years. It contained a provision that the buyer would not “make any major alterations or additions” to the property without Mariposa’s consent and also provided for the escrow of a warranty deed to the property and for delivery of the same to the buyer upon the payment of the full purchase price. [8] The IDAs were executed about the same time the ILCs were signed. Each IDA acknowledged the existence of the pertinent ILC; required Mountain Land or Buffalo Park to develop the property for residential building sites and to sell the same for a minimum price set forth in the agreement; and provided that each plaintiff would be paid from the sale proceeds an amount equal to the price to be paid under the ILC (less any amounts then owing under that ILC), plus one-half of the difference between the gross sales price of the developed sites and that price. Each agreement also provided that its “term” was to be four years from the date it was signed. [9] However, none of the land that was the subject of the IDAs was fully developed or sold within four years from the dates of those agreements, nor had any of the land been so developed or sold as of March 1981, when plaintiffs instituted this action against the defendants. This action wasPage 405
commenced because of the lack of such complete development.
[10] After trial, the court entered a judgment for compensatory damages against all defendants. In its extensive findings of fact and conclusions of law, it determined, generally, that all of the defendants were engaged in a joint venture, making each of them liable for the contract breach or fraud by any of them; that plaintiffs were the third-party beneficiaries of the Master Development Contract, which Buffalo Park had violated by failing to develop 80 acres per year; that Mountain Land and Buffalo Park had violated the provisions of the IDAs by failing to develop and sell the property subject to those agreements within four years; and that plaintiffs had been defrauded because certain material facts, upon which plaintiffs might have relied in contracting either with Mariposa, Mountain Land, or Buffalo Park, were not disclosed to them. [11] As damages, plaintiffs were awarded the amount which they had agreed to pay under the ILCs (less what they still owed), plus fifty per cent of the difference between that sales price and what the land’s fair market value would have been at the end of four years had the land been developed and sold by that time. However, plaintiffs were required, as a condition of this judgment, to convey their interest in the properties to Mariposa.[12] I. The Existence of a Joint Venture
[13] The defendants Mariposa, Iowa Gulch, Ltd., and Robert C. Murphy argue that the evidence of record is insufficient to demonstrate the existence of a joint venture between them and the other defendants. We agree.
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[18] Further, an agreement to share the gross proceeds of a venture is not an agreement to share in the profits of that venture. [19] “The sharing of gross returns does not of itself establish a partnership, whether or not the persons sharing them have a joint or common right or interest in any property from which the returns are derived.” [20] Section 7-60-107(1)(c), C.R.S. (1986 Repl. Vol. 3A) [21] In this case, the Master Development Contract provided that, while the “gross sales price” was to be divided equally between Mariposa and Buffalo Park, each party was to be separately and solely responsible for certain of the expenses involved. Hence, under that agreement, one of the parties could have enjoyed an individual profit, while the other might have sustained an individual loss. Under these circumstances, the parties cannot be said to be actual joint venturers. [22] It is true that the Master Development Contract contained provisions that contemplated the parties’ development of other portions of the land for commercial and recreational purposes, and it provided that such development was to be on the “same basis” as the development of the residential property, “namely 50% of the investment shall be made by each party and 50% of the profits shall be shared by each party.” [23] Before that project was to be started, however, the parties intended to “spell out” their specific duties, contributions and “ownership positions” by a further written agreement, and no other agreement was executed. Thus, this provision for future agreements is without significance in assessing their present relationship with reference to development of residential sites.[24] II. The Contract Claims A.
[25] Since neither Mariposa, Iowa Gulch, Ltd., nor Robert C. Murphy made any promise to plaintiffs to develop the land sold to them, the only basis for the entry of judgments against them on plaintiffs’ claims of contract violation was the assertion that these defendants were participants in a joint venture with the other defendants. Since we have concluded that the trial court erred in determining that a joint venture existed, all judgments against these three defendants, based upon any contractual claim, must be reversed.
B.
[26] The judgments against Lewis, Buffalo Park, and Mountain Land for contract violation were based upon their violation of both the Master Development Contract and each of the IDAs. However, since we agree that appropriate judgments were entered against Mountain Land and Buffalo Park based upon their violation of the respective IDAs, we need not address the validity of plaintiffs’ claim that they were third-party beneficiaries of the Master Development Contract.
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complete development within the four years contemplated by the agreements.
[31] In order to establish the defense of impossibility of performance, it is necessary to demonstrate that changed circumstances have rendered “the promise vitally different from what reasonably should have been within the contemplation of both parties when they entered into the contract.”Littleton v. Employers Fire Insurance Co., 169 Colo. 104, 453 P.2d 810(1969). If governmental action is asserted to have rendered a contract impossible to perform, such action must have made the performance illegal, either by requiring an unobtainable license or in some other way; a new regulation merely rendering the performance more costly does not result in a legal impossibility. Seago v. Fellet, 676 P.2d 1224 (Colo.App. 1983) See Beals v. Tri-B Associates, 644 P.2d 78 (Colo.App. 1982). Thus, the defense of impossibility was not established in this case. [32] Further, the trial court found, with record support, that development was not prevented by some external change in conditions, but, rather, that it did not occur as intended because of Lewis’ financial condition. Being supported by the evidence, this finding is binding on appeal. Page v. Clark, 197 Colo. 306, 592 P.2d 792 (1979).
[33] III. The Concealment Claims A.
[34] The various ILCs and IDAs were executed by plaintiffs in the years 1971, 1972, and 1973. The trial court found that, at the time of the execution of these agreements, Lewis was aware of a serious problem in obtaining Jefferson County’s approval of suitable access to that portion of the realty covered by those agreements. Because of this, and because of Lewis’ financial condition, he was at that time turning his attention to the development of other areas of Mariposa’s land, rather than to the property sold to plaintiffs.
B.
[39] The same may not be said, however, of the judgments based on concealment against the other defendants.
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made no finding either that some acknowledged agent of theirs had knowledge of all of the facts concealed or that any of them had an intent to conceal facts from plaintiffs. While the trial court’s findings are not entirely clear upon the point, it appears that the fraud judgments against these two defendants were premised upon the existence of a joint venture among them and the other defendants which rendered them liable for the tortious actions of Lewis and his companies.
[42] Since we have held that there was no joint venture between the two groups of defendants, the judgments against Mariposa and Iowa Gulch, Ltd., for fraud must be reversed.[43] IV. The Remedy A.
[44] The amount of damages awarded to plaintiffs was based upon the district court’s attempt to place plaintiffs in the same position they would have been in had the Lewis group of defendants completely developed their parcels of land and sold the sites at fair market value at the end of the four-year period after plaintiffs’ purchase of the ground. In each case, the court awarded to them the amount they had paid under the ILC (less any amount still owing), plus 50% of the difference between the purchase price under the ILC and the fair market value of the parcel had it been fully developed at that time.
B.
[48] Plaintiffs also argue that the trial court failed adequately to compensate them for the fraud practiced upon them. We also disagree with this argument.
(1967); Neiheisel v. Malone, 150 Colo. 586, 375 P.2d 197 (1962). [50] Here, in return for their promise to pay the purchase price, plaintiffs received both the right to obtain a deed to the parcel from Mariposa and Mountain Land’s or
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Buffalo Park’s agreement to develop those premises. Had plaintiffs been made aware of the facts concealed from them at that time, the purchase price under the ILCs might have been less, the IDAs might have contained terms more favorable to them, or both agreements might have been different. However, even if there had been a full disclosure of the concealed facts, the evidence suggests that the Lewis group would still not have completely developed the land, as required by the IDAs. Thus, the difference between the parcel’s undeveloped value at the time of its purchase and its developed value at some later time is irrelevant to the question of the damages incurred by plaintiffs as a result of the concealment.
[51] The comparison that is required is between the value of the total consideration received by plaintiffs (realty plus agreement to develop) without disclosure of the concealed facts (value as represented) and the value of the same consideration had the prospective buyer been aware of all of the material facts (true market value). However, our attention has not been directed to any part of the record which would have provided to the trial court a basis for awarding damages by utilizing this approach. [52] The trial court concluded that the crux of the wrong done to plaintiffs was the failure to develop the land as agreed. It determined, therefore, that an award of damages that would approximate the benefits that plaintiffs would have received had the IDA been performed was a proper measure for determining the damages flowing from both the contract breach and the fraud. While we do not agree that the same measure of damages is to be applied to both wrongs, we do agree that the evidence would not support a greater award of damages than was granted. C.
[53] Plaintiffs also assert that, since the trial court determined that defendants had engaged in fraudulent conduct, the court was obliged to enter an award of punitive damages. We cannot agree.
D.
[56] Finally, plaintiffs complain of the trial court’s direction that they reconvey the land to Mariposa. Relying upon this court’s opinion in Ackmann v. Merchants Mortgage Trust Corp., 659 P.2d 697 (Colo.App. 1982), rev’d on other grounds sub nom., Kopeikin v. Merchants Mortgage Trust Corp., 679 P.2d 599 (Colo. 1984), plaintiffs claim that they should be allowed to keep the property, rather than reconveying it. We disagree.
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them an amount representing the prior payments they had made on the notes, they were not made whole because they did not recover the amounts they had paid to the seller, who had taken bankruptcy. Under these circumstances, this court held that no error was committed in allowing plaintiffs to keep the property, the true value of which was substantially less than its represented value.
[59] Here, in contrast, the money judgment gave to plaintiffs everything that they would have received had the agreements been performed. Being fully compensated, they are not entitled to retain the realty. [60] In reaching this conclusion, we do not pass upon the question whether plaintiffs’ conveyance should be to the Lewis group of defendants, against whom the judgment runs, rather than to Mariposa. Plaintiffs have no legal interest in this issue and none of the defendants has complained of this portion of the judgment.[61] V. Pre-Judgment Interest
[62] Defendants also claim that the trial court lacked jurisdiction to enter any award for pre-judgment interest and, in any event, such interest could not properly be awarded. We disagree.
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Jesik, 703 P.2d 638 (Colo.App. 1985); Briggs v. Cornwell, 676 P.2d 1252
(Colo.App. 1983).
(Colo.App. 1983), this court held that the words of the pre-judgment interest statute were not to be interpreted strictly. Rather, we concluded that the statute’s legislative history required that “all cases are to be treated equally regarding the time interest begins to accrue.” (emphasis supplied) See Hott v. Tillotson-Lewis Construction Co., 682 P.2d 1220 (Colo.App. 1983). See also § 13-21-101, C.R.S. (1986 Cum. Supp.) providing for pre-judgment interest from the date an action for personal injuries accrues. Thus, the trial court properly concluded that plaintiffs were entitled to pre-judgment interest.
[70] VI. Other Contentions
[71] We have considered the other contentions made by the parties and have determined either that the foregoing conclusions render their discussion unnecessary or that they lack merit in light of the record and the trial court’s findings.